fiscal tightening

The impact of fuel duty on the macro-economy

In this short study, we assess the macro-economic impact of government plans to increase the rate of fuel duty from 1st January 2013. The assessment is carried using the National Institute’s Global Econometric Model, NiGEM. We use the methodology developed by Bagaria, Holland and Van Reenen (2012) to allow for the current depressed state of the UK economy, which will amplify and prolong the effects of any fiscal tightening measures introduced in the near term. We also consider some alternative policy options in relation to fuel duty